Providence Water Supply Bd. v. Public Utilities Com'n

• Decision Date: 11 March 1998
• Docket Number: No. 96-600-M,96-600-M
• Citation: 708 A.2d 537
• Parties: PROVIDENCE WATER SUPPLY BOARD v. PUBLIC UTILITIES COMMISSION. P.
• Court: Rhode Island Supreme Court

Page 537

708 A.2d 537

PROVIDENCE WATER SUPPLY BOARD v. PUBLIC UTILITIES COMMISSION.

No. 96-600-M.P.

Supreme Court of Rhode Island.

March 11, 1998.

Michael McElroy, Providence, for Plaintiff.

Alan Shoer, Francis X. Flaherty, William Conley, Jr., John Spirito, Jr., William E. Smith, Paul J. Roberti, Elizabeth A. Kelleher/Peter J. McGinn, Providence, for Defendant.

Before WEISBERGER, C.J., and LEDERBERG, FLANDERS and GOLDBERG, JJ.

OPINION

LEDERBERG, Justice.

This case came before the Supreme Court on a petition for certiorari by the Providence Water Supply Board (PWSB or petitioner). The PWSB had sought the approval of the Public Utilities Commission of the State of Rhode Island (PUC) to purchase and install an advanced water-meter-reading system. The PUC issued an order barring the request, reconsidered its action, then reaffirmed its denial. The PWSB then sought certiorari of the PUC's decision. For the following reasons, we grant the petition for certiorari.

Facts and Procedural History

This case concerns a dispute over the type of water-meter-reading technology to be installed by the PWSB to measure water use by its customers. The PWSB supplies water to approximately 600,000 Rhode Islanders, about half of whom are served through the PWSB's retail system that comprises approximately 68,500 accounts.

Advances in meter-reading technology have made traditional in-building, manual readings unnecessary. Instead, electronic meter interface units (MIUs) installed on the exterior of a customer's building and connected to the inside water-meter by a wire can allow water meters to be read without entering a building. By using an electronic MIU, also known as an ARB, ¹ meter readers can plug a hand-held decoder into the unit mounted on the building's exterior and thereby obtain a meter reading. A more recent technology, called radio-frequency automated meter reading or AMR technology, utilizes a low-power radio transmitter connected to an inside water meter to determine water consumption from outside the premises. The AMR unit transmits to the outside of the building, thereby permitting a meter to be read in one of three ways: (1) by making meter readings from the interior of a van traveling through the customer's neighborhood, (2) by accessing the customer's radio signal from a centrally located stationary receiving unit, or (3) by utilizing a hand-held receiving unit while walking through a customer's neighborhood.

An additional stitch in the tapestry of this case is the Comprehensive Clean Water Infrastructure Act of 1993, G.L.1956 chapter 15.6 of title 46. The act seeks "to protect the purity of present and future drinking water supplies by protecting the infrastructure of potable water, including treatment plants, pipes, valves, pumping stations, storage facilities, interconnections, and water mains." Section 46-15.6-2(3). Under the act, water suppliers such as the PWSB are required to "prepare, maintain, and carry out an infrastructure replacement program." Section 46-15.6-3. The act directs water suppliers to prepare and submit to the State Department of Health a twenty-year "detailed financial forecast of facility replacement improvement requirements," § 46-15.6-4(a)(1), and mandates review of their infrastructure replacement (IFR) components at least once every five years. Section 46-15.6-5(c). The act further requires that after review and approval by the health department, "[e]ach water supplier shall implement the requirements of its infrastructure replacement program and component, including its infrastructure replacement fund." Section 46-15.6-5(d) and (e).

On March 31, 1995, petitioner filed an application with the PUC, seeking a general increase of $11,111,008 in its then-existing rate schedules, which represented an increase of approximately 49.6 percent. As part of the filing, the PWSB sought approximately $4.4 million toward the estimated $13.5 million in projected expenditures for planned infrastructure projects for the 1996 calendar year; $9.1 million in available bond funds was expected to cover the remainder.

At the time of petitioner's application, 26,765 (approximately 39 percent) of the PWSB's 68,562 retail accounts were serviced by fully operational ARB meters; the remaining 41,797 (approximately 61 percent) lacked such technology and required manual, in-building meter readings. In pertinent part the application proposed the implementation of a comprehensive upgrade of meters using the newer AMR technology. The full estimated cost of the proposed AMR modernization, including associated meter-replacement costs, was listed as a capital improvement expenditure on the PWSB's five-year capital plan and was not listed as an IFR component on petitioner's accompanying five-year IFR plan. In addition, however, petitioner's twenty-year IFR plan, also a part of the 1995 submission, projected over $15.5 million in expenditures for "Meters" between fiscal years 2011 and 2015. It was pointed out to the PUC that the five- and the twenty-year IFR plans submitted were only draft versions.

The Rhode Island Division of Public Utilities and Carriers (division), which was established pursuant to G.L.1956 § 39-1-3(a) "to serve the commission in bringing to it all relevant evidence, facts, and arguments that will lead the commission in its quasi-judicial capacity to reach a just result," Providence Gas Co. v. Burke, 419 A.2d 263, 270 (R.I.1980), objected to the AMR modernization. The division instead proposed that the PWSB's meter-reading system be repaired and upgraded using the existing ARB technology.

After several public hearings and open meetings, the PUC issued a report and order on December 26, 1995 (1995 order), which, inter alia, rejected the PWSB's request for a rate increase of $11,111,008 and instead authorized petitioner to file new tariffs designed to recover additional revenues of $8,093,883. The order further authorized the PWSB to collect $4 million "in additional rate year revenues * * * to expense its proposed rate year IFR plan." At the same time, the PUC denied the PWSB's request for the AMR technology.

The PUC observed that estimates for providing ARB technology to the more than 41,500 retail accounts that were without such technology ranged from the division's claim of $3,400,186 to petitioner's estimate of $8,694,349, whereas petitioner's projected expense for implementing the comprehensive AMR system--involving all the PWSB's approximately 68,500 retail accounts--was $18,370,003. Opining that "the costs related to [the AMR system] of consumption recording cannot be taken lightly," the PUC concluded that AMR technology was too expensive. The PUC's 1995 order did authorize the PWSB to collect $400,000 in additional revenues from its ratepayers in order to service the debt incurred by issuing at least $4 million in revenue bonds. The PUC further mandated that petitioner use the $4 million to begin its meter-system upgrade using the ARB technology.

In the wake of the PUC's 1995 order, the final version of petitioner's five-year IFR plan was submitted to the health department for review and approval under a cover letter dated February 29, 1996. The plan listed "[r]eplace[ment of] water meters" as a line item, requesting approximately $4.5 million between fiscal years 1996 and 2000.

On June 17, 1996, the PWSB filed a motion for "Limited Reconsideration Regarding Automated Meter Reading (AMR)" (motion) with the PUC pursuant to Rule 1.28(b) of the PUC's Rules of Practice and Procedure. In the motion, petitioner requested that the PUC allow the PWSB "to install AMR transmitters instead of outside reading devices (ARBs) on the approximate 41,500 meters which do not have functioning ARBs on them at this time" and asked further that the PUC "allow us to categorize replacement meter costs as an allowable infrastructure replacement (IFR) cost."

Emphasizing that "[w]e are not requesting any [further] increase in rates," the PWSB maintained that it could install AMR transmitters on the more than 41,500 accounts ² for a revised total cost of $3,863,000. This revised total, the PWSB observed, was well within the $4 million previously approved by the PUC in 1995 for the meter-system upgrade. Referring to its "unfortunate presentation in the original filing," ³ petitioner asserted in its motion that

"because many of the items in the [1995] total AMR implementation cost were already included in our rates, because the actual cost of the AMR transmitter itself has come down by over 30%, and because we are also asking the Commission to allow us to include the replacement of the meters themselves where necessary into the infrastructure replacement (IFR) program, which is where it properly belongs, we have determined that we can install AMRs for an amount equal [to] what this Commission has already authorized for the installation of ARBs on these accounts."

In testimony appended to the motion, PWSB Director of Finance Paul Titzmann (Titzmann) asserted that the PWSB would not need to purchase any more meters for the AMR installation than it would have to purchase for the previously approved ARB upgrade and repair. Moreover, Titzmann emphasized that the cost of replacing the meters was an eligible expenditure in petitioner's IFR program and that, as such, additional funding for the meters was not necessary.

It is undisputed that when the motion was heard before the PUC on September 16 1996, no evidence was presented to contradict the PWSB's revised estimate of the cost of AMR installation. Significantly, the division, which had opposed petitioner's 1995 request to utilize the AMR technology, endorsed the PWSB's position. In support of its motion, petitioner introduced a Stipulation and Settlement (stipulation) entered into by the PWSB and the division, wherein the division agreed to the implementation of a partial AMR system to be accomplished "without an increase in rates." The stipulation...